According to the report, Philippine officials said they were in talks with their Chinese counterparts to finalize a deal that could see both sides working to find oil and natural gas in the South China Sea.

“What we are looking at is a deal that will first cover exploration activities in uncontested areas,” said an administration official, who spoke on condition of anonymity because sensitive negotiations were still ongoing.

The report comes as recently elected Philippine President Rodrigo Duterte cools relations with long-time ally the U.S., and moves closer to Beijing – a controversial move that critics both within and outside the country question.

Duterte took office shortly after The Permanent Court of Arbitration at The Hague issued a scathing report in July against China in favor of the Philippines over Beijing's claim to more than 80% of the South China Sea, including areas within the Philippines’ UN-mandated exclusive economic zones (EEZ).

In 2012, after a terse stand-off between Chinese maritime vessels and the Philippine navy, China seized Scarborough Shoal in the South China, which is clearly within Manila's EEZ.

Up to and shortly after the ruling, Sino-U.S. tensions worsened as Beijing accused Washington of meddling in its affairs by showing support for Manila.